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stout
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Wall Street: Housing market to see 2nd biggest home price decline since Great Depression

quote:

Not only is there a building consensus on Wall Street that we’ve entered into a period of falling home prices, but there’s also a consensus it will be the second-sharpest home price decline since the Great Depression.

U.S. home prices declined month-over-month last week for the first time since 2012, according to the Case-Shiller U.S. National Home Price Index.

So far, it doesn’t involve all U.S. markets. But more markets are also expected to fall.

“Corrections in home prices can be expected in 2023 as long as interest rates remain elevated and consumer demand remains slow,” said Zonda’s chief economist @AliWolfEcon

By the end of 2023, U.S. home prices could fall to 7%, predicts Morgan Stanley.

That’s far smaller than the 27% peak-to-trough decline between 2006 and 2012 but larger than the 3.1% peak-to-trough decline in the early ‘90s.

) But the 7% is only Morgan Stanley’s “base case” forecast for home prices.

the “bull case” is a 5% climb in 2023
the “bear case” could exceed a 10% decline in 2023

Other U.S. home price forecasts for 2023:

Goldman Sachs: fall 5% to 10%
Moody’s Analytics: fall 5% to 10%
Fitch Ratings: fall 10% to 15%

The most vulnerable home markets are those where:

prices rose sharply because of hybrid work (Boise, Las Vegas, & Denver)
home prices and incomes are out of whack (Nashville, parts of Florida)
housing inventory has risen rapidly (Phoenix, Austin)




Twitter thread

Full article


Where are all the guys that said there wont be mass foreclosures because people have built up tons of equity?

How about all of the guys on here saying the RE market won't crash because there's still an inventory shortage?

Unless you sold last year or earlier this year your hopes for a quick sale to stave off foreclosure is dead and your equity is going to continue to decline. Also, inventory shortages don't mean anything if people can't afford to buy. Pre-runaway inflation housing prices were already far outpacing wage growth and had been that way for the past decade but some of you hang your hate on "low inventory levels" being the saving grace.

BTW, there are still 400K people in forbearance from Covid and the prediction is that the majority won't be able to make it out of forbearance. So with a soft market, those people will go into foreclosure unless the current regime prints more money to bail them out. By comparison, the peak of the housing crash from 2007-08 was in 2010 when over 1 million homes went into foreclosure so we aren't going to be terribly far off.


The early signs of things getting worse are there:

quote:

“Early-stage delinquencies are showing a small but clear increasing trend on a month-over-month and year-over-year basis,” said Molly Boesel, Principal Economist at CoreLogic. “While the share of mortgages that are 30 to 89 days past due remains below the pre-pandemic level, the slight increase is occurring in most areas of the country and could indicate that more borrowers are having trouble making their monthly payments.”

Although overall U.S. mortgage delinquencies crept up again in July from earlier in 2022, they declined for the 16th straight month year-over-year and remained near historic lows. The national foreclosure rate has held steady at 0.3% since March, but rose by 0.1-percentage point from July 2021. This slight bump mirrors metro-level trends, with almost two-thirds of areas that CoreLogic tracks posting small annual foreclosure gains. The minor uptick in foreclosures may be due to mortgage forbearance periods and moratoriums ending for some homeowners, while the increase in delinquencies could indicate that inflation is negatively impacting others’ abilities to make monthly payments.

Early-stage delinquencies, those 30 to 59 days past due, stood at 1.3%, up from 1.1% in July 2021. Those measured as “Adverse Delinquency,” or 60 to 89 days past due, measured 0.4%, up from 0.3% in July 2021.

Mortgage loans deemed in “Serious Delinquency,” 90 days or more past due, including loans in foreclosure, stood at 1.3%, down from 2.8% in July 2021, and a high of 4.3% in August 2020.

The Foreclosure Inventory Rate, representing the share of mortgages in some stage of the foreclosure process, was at 0.3% in July 2022, up from 0.2% in July 2021, while the Transition Rate, measured as the share of mortgages that transitioned from current to 30 days past due, stood at 0.7%, up from 0.6% year-over-year in July 2021.



LINK



The year-over-year comparison is unfair considering the shutdowns and mass forbearance programs. Even comparing current data to 2019 is unfair because of the 2-year interruption we had. The real concern is looking at the month-to-month data and it is showing an upward trend.

This is going to be a crash in some of the hot markets and will be a hard landing for the entire USA RE market. There is no way for the Fed at this point to steer it to a soft landing and they said as much the last time they rose rates.





danilo
Member since Nov 2008
16235 posts

Ready for yet another once in a lifetime event


idlewatcher
Houston Astros Fan
County Jail
Member since Jan 2012
67756 posts

quote:

Where are all the guys that said there wont be mass foreclosures because people have built up tons of equity?


Foreclosures rarely happen within that sect. It's the new home buyers who have no business owning a home.

The new BOA stuff is only going to add to the foreclosure rates. Bad credit, job hoppers, etc. Fortunately for guys like me, it's an opportunity


Abstract Queso Dip
Member since Mar 2021
5878 posts

but delinquies are down. this doesn't make sense. the author be dumb.

That's like Randy Johnson saying "I never could throw a good fastball"


stout
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Member since Sep 2006
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quote:

Ready for yet another once in a lifetime event



Funny how these "once in a lifetime" events are all in some way induced by the FED


stout
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quote:

but delinquies are down. this doesn't make sense. the author be dumb.




I explained that to you. Do you need me to use smaller words?


quote:

The year-over-year comparison is unfair considering the shutdowns and mass forbearance programs. Even comparing current data to 2019 is unfair because of the 2-year interruption we had. The real concern is looking at the month-to-month data and it is showing an upward trend.


athenslife101
Georgia Fan
Member since Feb 2013
17031 posts

Good.

Market since the early 2000s has been begging for corrections. For 20 years we’ve lived oblivious to any sort of real consequences (Great Recession included).



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TBoy
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20498 posts

Housing prices are ridiculously inflated as massive amounts of investment capital has been pouring into purchasing housing for several years. It's to the point that a private family cannot afford to purchase even a modest home in many markets, and is forced to pay sky-high rent.

That bubble has to pop. Otherwise we will have to go back to living in caves and under the roots of fallen trees.


stout
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quote:

Foreclosures rarely happen within that sect



Its not that rare. Divorce, job less, etc still sends many people spiraling out of control. I see it constantly in my line of business.


fallguy_1978
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I've seen some analysts predict 20-25% declines in some markets.
This post was edited on 10/4 at 9:22 am


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kingbob
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Some how, some way, BR area prices will only go up.


stout
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quote:

I've seen some analysts predict 20-25% declines in some markets.




That wouldnt shock me and I suspect internally those are the real numbers these banks are coming up with but they won't publish those out of concern of inducing panic.


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Abstract Queso Dip
Member since Mar 2021
5878 posts

Why is home prices declining bad? That's good for Americans with jobs and good credit. Aren't we trying to stop inflation?


stout
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quote:

Housing prices are ridiculously inflated as massive amounts of investment capital has been pouring into purchasing housing for several years. It's to the point that a private family cannot afford to purchase even a modest home in many markets, and is forced to pay sky-high rent.



I agree with you and have been saying for years that wage growth compared to housing prices has not made sense. It is all driven by hedge funds like Blackrock buying massive amounts of inventory driving the shortages even higher.


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134
BluegrassBelle
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RIP Hefty Lefty - 1981-2019
Member since Nov 2010
92081 posts

quote:

Funny how these "once in a lifetime" events are all in some way induced by the FED


That bubble was eventually going to have to pop though. Housing prices were nuts. And largely pushed up in urban areas by companies buying large chunks of “middle class” estate to either flip or rent out.


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71
McLemore
Member since Dec 2003
29546 posts

quote:

By the end of 2023, U.S. home prices could fall to 7%, predicts Morgan Stanley.


Of what? Assume typo.


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athenslife101
Georgia Fan
Member since Feb 2013
17031 posts

quote:

Why is home prices declining bad? That's good for Americans with jobs and good credit. Aren't we trying to stop inflation?


He’s worried about the people who vastly overpaid for their homes being stuck with their poor decisions. It’s good for regular people who stay within their means. It’s bad for the real estate industry at large who’ve been mass buying houses who will see major losses.
This post was edited on 10/4 at 9:27 am


Bdiddy
McNeese State Fan
Member since Jul 2021
160 posts

“While the share of mortgages that are 30 to 89 days past due remains below the pre-pandemic level"

Your histrionics are just a bit premature.


Abstract Queso Dip
Member since Mar 2021
5878 posts

frick the corporations proping up housing. Anyone stupid enough to buy a house with an ARM loan during lowest interest rate environment all time should also be punched in the face.

What is going to cause this housing crisis? there isn't a MBS problem. banks are well capitalized. Job demand is strong and will continue to be strong?

No one can explain to me these 40 percent market corrections. The only thing that I see is a bunch of overleveraged wishcaster econ people at hedgefunds.


stout
Arizona Fan
Smoking Crack with Hunter Biden
Member since Sep 2006
157349 posts
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quote:

Why is home prices declining bad? That's good for Americans with jobs and good credit. Aren't we trying to stop inflation?



You're over simplyfing it but I agree a correction has been needed for some time now.

It's good for anyone that hasn't bought within the past two years but wants to buy soon. The problem will be for those that bought at the peak and in some cases overpaid due to bidding wars. If they need to sell soon they are screwed possibly.

It's also bad for anyone that counts their equity into their net worth and uses HELOCs for other purchases.

Also, anyone that has an ARM is going to play hell trying to get a decent rate and in lieu of doing so may have to try to sell as they won't be able to afford the new payment.

Just a lot of variables to say it is 100% good but overall a correction is healthy and we need to get back to a normal value appreciation rate of 5-7% annually. None of the 40%+ jumps we have seen.


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